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European Union - EU - Brussels

The sustainable investing market has witnessed remarkable growth. At the same time, the field has been challenged by a lack of consistency in identifying what, exactly, makes an investment “sustainable”.  Sustainability taxonomies (or classification systems) have been developed by governments, international bodies and non-governmental organizations to help identify specific assets, activities or projects that meet defined thresholds and metrics that quantify sustainability.  Many of these taxonomies refer to or emulate the EU Taxonomy, widely regarded as the most developed system for sustainable finance investment classification and measurement.
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Continue Reading ICMA Identifies Usability Challenges – and Recommends Action – for Implementing the EU Taxonomy

United States - Washington DC

On February 9, 2022, the U.S. Federal Housing Finance Agency (“FHFA”) released its Draft FHFA Strategic Plan: Fiscal Years 2022-2026 (the “2022 Strategic Plan”) for public input.

This year, FHFA added a novel objective to this plan – to identify options for incorporating climate change into FHFA’s governance of the entities it regulates.

According to FHFA Acting Director Sandra L. Thompson, the 2022 Strategic Plan provides a roadmap for FHFA to promote sustainable and equitable access to mortgage credit and protect the safety and soundness of the U.S. housing system. While not a statutory requirement, the FHFA uses its strategic planning process to set priorities based on important stakeholder input. Typically, FHFA releases a strategic plan every few years, outlining the agency’s priorities for the supervision and regulation of the Federal Home Loan Banks, and of Fannie Mae and Freddie Mac (the “Enterprises”). The agency sets forth those priorities through strategic goals and objectives to achieve those goals.…

Continue Reading FHFA’s Strategic Plan Adds Focus on Climate Change

iceberg with above and underwater view

On 2 March 2022, 175 nations endorsed a historic resolution at the fifth session of the United Nations Environmental Assembly to develop a draft global agreement on plastic pollution by the end of 2024. Significantly, the resolution covers the full lifecycle of plastic including its production, design and disposal. Inger Andersen, Executor Director of the…

Asset Management

The sustainable investing market is witnessing remarkable growth: since 2018, annual cash flows into sustainable funds have increased tenfold. Now, more than ever, investors and asset managers alike seek sustainable products and strategies offering robust financial returns. The field, however, has been haunted by greenwashing claims and a lack of consistency in identifying what, exactly, makes an investment “sustainable”.

Sustainability or “green” taxonomies developed by governments, international bodies and non-governmental organizations (NGOs) can help resolve these challenges and inconsistencies by identifying specific assets, activities or projects that meet defined thresholds and metrics that quantify sustainability. These systems can cover the full spectrum of sustainability topics, from achieving acceptable levels of greenhouse gas emissions to compliance with certain human rights standards. Among other benefits, sustainability taxonomies can:

  • assist investors, asset managers and asset owners in identifying sustainable investment opportunities and constructing sustainable portfolios that align with taxonomy criteria;
  • drive capital more efficiently toward priority sustainability projects;
  • help protect asset managers against claims of greenwashing by providing an independent benchmark for the sustainability performance of investments; and
  • guide future public policies and regulations targeting specific economic activities based on taxonomy criteria.

In this series of Blog Posts, we first provide a brief overview of some of the key existing and developing taxonomies around the world. We then set out our analysis of the ways asset managers are already leveraging taxonomies in their businesses based on a review of publicly available responsible investment reports.  Finally, we highlight certain challenges that asset managers may encounter as these systems develop and interest in sustainable investing continues to grow.

Continue reading this Part III to understand some of the taxonomy-related challenges that asset managers may encounter. You can find Parts I and II here and here.…

Continue Reading Leveraging Taxonomies: How Asset Managers Are Using New Sustainability Classification Systems – Part III

Asset Management

The sustainable investing market is witnessing remarkable growth: since 2018, annual cash flows into sustainable funds have increased tenfold. Now, more than ever, investors and asset managers alike seek sustainable products and strategies offering robust financial returns. The field, however, has been haunted by greenwashing claims and a lack of consistency in identifying what, exactly, makes an investment “sustainable”.

Sustainability or “green” taxonomies developed by governments, international bodies and non-governmental organizations (NGOs) can help resolve these challenges and inconsistencies by identifying specific assets, activities or projects that meet defined thresholds and metrics that quantify sustainability. These systems can cover the full spectrum of sustainability topics, from achieving acceptable levels of greenhouse gas emissions to compliance with certain human rights standards. Among other benefits, sustainability taxonomies can:

  • assist investors, asset managers and asset owners in identifying sustainable investment opportunities and constructing sustainable portfolios that align with taxonomy criteria;
  • drive capital more efficiently toward priority sustainability projects;
  • help protect asset managers against claims of greenwashing by providing an independent benchmark for the sustainability performance of investments; and
  • guide future public policies and regulations targeting specific economic activities based on taxonomy criteria.

In this series of Blog Posts, we first provide a brief overview of some of the key existing and developing taxonomies around the world. We then set out our analysis of the ways asset managers are already leveraging taxonomies in their businesses based on a review of publicly available responsible investment reports.  Finally, we highlight certain challenges that asset managers may encounter as these systems develop and interest in sustainable investing continues to grow.

Continue reading this Part II for our analysis of how asset managers are already leveraging taxonomies. You can find Parts I and III here and here.…

Continue Reading Leveraging Taxonomies: How Asset Managers Are Using New Sustainability Classification Systems – Part II

Asset Management

The sustainable investing market is witnessing remarkable growth: since 2018, annual cash flows into sustainable funds have increased tenfold. Now, more than ever, investors and asset managers alike seek sustainable products and strategies offering robust financial returns. The field, however, has been haunted by greenwashing claims and a lack of consistency in identifying what, exactly, makes an investment “sustainable”.

Sustainability or “green” taxonomies developed by governments, international bodies and non-governmental organizations (NGOs) can help resolve these challenges and inconsistencies by identifying specific assets, activities or projects that meet defined thresholds and metrics that quantify sustainability. These systems can cover the full spectrum of sustainability topics, from achieving acceptable levels of greenhouse gas emissions to compliance with certain human rights standards. Among other benefits, sustainability taxonomies can:

  • assist investors, asset managers and asset owners in identifying sustainable investment opportunities and constructing sustainable portfolios that align with taxonomy criteria;
  • drive capital more efficiently toward priority sustainability projects;
  • help protect asset managers against claims of greenwashing by providing an independent benchmark for the sustainability performance of investments; and
  • guide future public policies and regulations targeting specific economic activities based on taxonomy criteria.

In this series of Blog Posts, we first provide a brief overview of some of the key existing and developing taxonomies around the world. We then set out our analysis of the ways asset managers are already leveraging taxonomies in their businesses based on a review of publicly available responsible investment reports.  Finally, we highlight certain challenges that asset managers may encounter as these systems develop and interest in sustainable investing continues to grow.

Continue reading this Part I for a better understanding of existing and developing taxonomies around the world. You can find Parts II and III here and here.…

Continue Reading Leveraging Taxonomies: How Asset Managers Are Using New Sustainability Classification Systems – Part I

Asset Management

On November 23, 2021, the International Organization of Securities Commissions (IOSCO) issued its “Environmental, Social and Governance (ESG) Ratings and Data Providers” final report in which IOSCO makes 10 recommendations related to the use of ESG ratings and data products in financial markets. In a new Legal Update, we discuss the report and…

China - Hong Kong

On November 26, 2021, Hong Kong’s Mandatory Provident Fund Schemes Authority (MPFA) advanced the Special Administrative Region’s sustainable finance strategy with new Principles for Adopting Sustainable Investing in the Investment and Risk Management Processes of MPF Funds (the Principles). The Principles lay out a high-level ESG integration framework for trustees of Mandatory Provident Funds (MPF), the investment vehicles for the Hong Kong’s mandatory retirement protection scheme, across four key elements: governance, strategy, risk management and disclosure.

In this Blog Post, we provide a brief overview of the Principles and highlight each element, as well as important next steps for MPF trustees. We also provide guidance on how companies are already implementing ESG frameworks similar to the Principles.…

Continue Reading Hong Kong Regulator Issues Sustainable Investing Principles for Pension Fund Trustees

Energy innovation light bulb graphic interface.

The sheer volume of capital flows into sustainable, or ESG-focused, funds and products over recent months reflects the rapidly increasing number of investors with ESG-related preferences, or demands, when selecting those investments.  Evaluating, and comparing, the ESG credentials of different investment products presents significant difficulties, however, in circumstances where information and disclosures about those products – and even the terminology used – are, at best, inconsistent, and often incomplete; and, at worst, may attract accusations of “greenwashing”, by using marketing materials to mislead investors about the ESG approaches used in their products.
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Continue Reading The CFA Institute releases Global ESG Disclosure Standards for Investment Products

Products

Climate change could have serious impacts on the mortgage industry, and stakeholders should take action now. That is the recent urgent message from federal regulators and mortgage industry stakeholders.

Recent reports and initiatives from the Mortgage Bankers Association’s Research Institute for Housing America, the White House, the Departments of Housing and Urban Development, Veterans Affairs…